Breaking Down Parsons Corporation (PSN) Financial Health: Key Insights for Investors

Are you keeping a close watch on your investments? Interested in the financial stability and future prospects of companies like Parsons Corporation (PSN)? Let's delve into Parsons' financial health, focusing on key insights from the 2024 fiscal year. Did you know Parsons reported a record revenue of $6.8 billion, a 24% increase year-over-year, with organic revenue growth of 22%? But how does this growth translate into overall financial well-being, and what should investors consider moving forward? Keep reading to find out!

Parsons Corporation (PSN) Revenue Analysis

Parsons Corporation's financial health can be better understood by examining its revenue streams, growth, and segment contributions. Understanding these elements provides investors with key insights into the company's performance and potential.

Parsons Corporation [PSN] reported revenue of $5.26 billion for the fiscal year ended December 2024. This represents a 19.76% increase compared to the $4.39 billion reported in the previous year. This substantial growth highlights the company's strong performance and expanding market presence.

Here’s a breakdown of Parsons Corporation’s primary revenue sources:

• Federal Solutions: Parsons derives a significant portion of its revenue from providing solutions to the U.S. federal government.
• Critical Infrastructure: The company generates revenue from infrastructure projects, including transportation, water, and environmental solutions.
• Cyber & Intelligence: Parsons earns revenue through its cyber security and intelligence services.

A closer look at the contribution of different business segments to Parsons' overall revenue provides further clarity:

For the year 2024, Parsons' revenue can be broken down by segment. While specific percentages may fluctuate year to year, the structure remains consistent:

Parsons Corporation operates primarily through two segments:

• Critical Infrastructure: Focuses on engineering, construction, and program management services for infrastructure projects.
• Federal Solutions: Delivers technical and management solutions to the U.S. federal government.

The following table shows a detailed breakdown of revenue by segment for fiscal year 2024:

As the table illustrates, Federal Solutions contributed $2.82 billion, representing 53.6% of the total revenue, while Critical Infrastructure accounted for $2.44 billion, or 46.4%. This indicates a slightly larger revenue stream from the Federal Solutions segment.

Analyzing year-over-year revenue growth rates provides insight into the consistency and momentum of Parsons Corporation's financial performance. The 19.76% increase in revenue from 2023 to 2024 indicates robust growth. Here's a brief overview of historical trends:

• 2022 to 2023: Revenue increased from $3.96 billion to $4.39 billion.
• 2023 to 2024: Revenue increased from $4.39 billion to $5.26 billion, marking a substantial acceleration in growth.

Significant changes in revenue streams can be attributed to several factors, including strategic acquisitions, expansions into new markets, and major project wins. For instance, Parsons' focus on technology and innovative solutions has enabled it to secure significant contracts, thereby boosting revenue.

For more insights into the company's guiding principles, you can explore: Mission Statement, Vision, & Core Values of Parsons Corporation (PSN).

Parsons Corporation (PSN) Profitability Metrics

Assessing the financial health of Parsons Corporation (PSN) requires a close examination of its profitability metrics. These metrics provide insights into the company's efficiency in generating profits from its revenue and assets. Let's delve into the key profitability indicators for PSN.

For the fiscal year 2024, Parsons Corporation reported impressive financial results. The company's performance since its IPO reflects substantial growth across various financial metrics.

Key highlights for the fiscal year 2024 include:

• Record revenue of $6.8 billion, marking a 24% year-over-year increase.
• Organic revenue growth of 22%.
• Net income surged by 46% to $235 million.
• Adjusted EBITDA increased by 30% to $605 million.
• Record cash flow from operations increased by 28% to $524 million.

Here is a table summarizing Parsons's profitability metrics over the past few years:

The gross profit margin for the quarter ending December 31, 2024, was 3.48%. The average gross margin for 2023 was 2.7%, a 20% increase from 2022.

Parsons's operating income margin for the trailing 12 months (TTM) ending December 31, 2024, is 6.34%, reflecting a 19.69% change year-over-year. This increase indicates enhanced efficiency in core business operations.

The adjusted EBITDA margin for the year ended December 31, 2024, was 9.0%, compared to 8.5% in the prior year period. The year-over-year increases were driven by growth on accretive contracts, contributions from acquisitions, and effective cost management.

Parsons has demonstrated a commitment to managing costs effectively, contributing to the increase in profitability. For instance, the adjusted EBITDA increase was driven primarily by the ramp-up of recent contract wins and growth on existing contracts, coupled with effective cost control.

While Parsons Corporation has shown strong financial performance and strategic growth, analysts remain cautious, noting that the stock has underperformed compared to other IT services stocks. Factors contributing to this include lower capitalization, sales per employee, analyst coverage, and a lower forward PE ratio compared to its peers.

Despite these challenges, Parsons Corporation secured significant contract awards, totaling $7.0 billion for the fiscal year 2024, a 17% increase year-over-year, demonstrating its ability to execute its strategic vision.

Explore more about Parsons Corporation's investor profile: Exploring Parsons Corporation (PSN) Investor Profile: Who’s Buying and Why?

Parsons Corporation (PSN) Debt vs. Equity Structure

Understanding how Parsons Corporation finances its operations and growth is crucial for investors. The balance between debt and equity reveals insights into the company's financial risk and stability. Here's a breakdown of Parsons Corporation's debt levels, ratios, and financing strategies.

Parsons Corporation's capital structure includes both long-term and short-term debt. Monitoring these levels helps to gauge the company's ability to meet its obligations. As of the fiscal year 2024, Parsons Corporation had a total debt of $984 million. The company’s long-term debt was around $784 million, complemented by short-term debt of approximately $200 million. These figures are crucial for assessing the company's overall financial leverage and risk profile.

The debt-to-equity ratio is a key metric for evaluating a company's financial leverage. As of fiscal year 2024, Parsons Corporation's debt-to-equity ratio stands at approximately 1.16. This ratio indicates that Parsons has more debt than equity. When compared to industry standards, it’s important to consider that engineering and construction companies often carry higher debt levels due to capital-intensive projects. However, a ratio above 1.0 suggests higher financial risk, warranting careful monitoring.

Recent activities in debt markets can significantly impact a company's financial health. Parsons Corporation has been proactive in managing its debt through various issuances and refinancing activities. Recent activities include:

• In August 2024, Parsons priced an offering of $400 million aggregate principal amount of 2.375% convertible senior notes due 2029 in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Parsons also granted the initial purchasers of the notes an option to purchase up to an additional $60 million aggregate principal amount of notes.
• In September 2024, Parsons announced the closing of its offering of 2.375% convertible senior notes due 2029. The aggregate principal amount of the notes issued in the offering was $460 million, which includes notes issued upon the exercise in full of the initial purchasers’ option to purchase additional notes.

Credit ratings provide an independent assessment of a company's ability to repay its debt. Parsons Corporation's credit ratings reflect its financial stability and creditworthiness. As of late 2024, Parsons has a credit rating of BBB- from S&P and Ba1 from Moody’s, both with a stable outlook. These ratings indicate that Parsons is considered to have an adequate capacity to meet its financial commitments.

Balancing debt and equity is crucial for sustainable growth. Parsons Corporation strategically uses both debt and equity to fund its operations, acquisitions, and capital expenditures. The company’s approach involves carefully assessing market conditions and financing costs to optimize its capital structure. While debt can provide leverage and enhance returns, it also increases financial risk. Equity financing, on the other hand, reduces financial risk but can dilute ownership.

Parsons Corporation's strategy includes:

• Maintaining a balanced capital structure to ensure financial flexibility.
• Optimizing the cost of capital by strategically using debt and equity.
• Investing in projects and acquisitions that generate strong cash flows to support debt repayment.

Here is a summary of Parsons Corporation's debt and equity structure:

For more detailed insights into Parsons Corporation's financial health, you can read: Breaking Down Parsons Corporation (PSN) Financial Health: Key Insights for Investors

Parsons Corporation (PSN) Liquidity and Solvency

Understanding Parsons Corporation's financial health requires a close look at its liquidity and solvency positions. Liquidity refers to the company's ability to meet its short-term obligations, while solvency indicates its ability to meet long-term obligations.

Here's an overview of key financial indicators for assessing Parsons Corporation's liquidity:

• Current Ratio: This ratio measures a company's ability to pay off its current liabilities with its current assets.
• Quick Ratio: Similar to the current ratio, but it excludes inventories from current assets to provide a more conservative view of liquidity.
• Working Capital: This is the difference between a company's current assets and current liabilities. It indicates the amount of liquid assets available to fund operations.

Analyzing the trends in these ratios and working capital over time can provide insights into whether Parsons Corporation's liquidity position is improving or deteriorating. Declining ratios or decreasing working capital could signal potential liquidity issues.

The cash flow statement offers a comprehensive view of how Parsons Corporation generates and uses cash. Key sections to analyze include:

• Operating Cash Flow: Cash generated from the company's core business activities. A positive and growing operating cash flow is generally a good sign.
• Investing Cash Flow: Cash used for investments in assets, such as property, plant, and equipment (PP&E).
• Financing Cash Flow: Cash flows related to debt, equity, and dividends.

Here's a hypothetical example of how these cash flows might look for Parsons Corporation:

Positive operating cash flow indicates the company is generating cash from its core business. Negative investing cash flow suggests the company is investing in its future, while negative financing cash flow could indicate the company is paying down debt or returning cash to shareholders.

Keep in mind that while Parsons Corporation exhibits financial strengths, it's also subject to certain financial risks, like any other company. Prudent management and strategic financial planning are vital for sustained financial health. Investors should closely monitor these metrics to assess Parsons Corporation's ongoing financial stability and make informed decisions.

More information can be found here: Breaking Down Parsons Corporation (PSN) Financial Health: Key Insights for Investors

Parsons Corporation (PSN) Valuation Analysis

Assessing whether Parsons Corporation (PSN) is overvalued or undervalued requires a multifaceted approach, incorporating key financial ratios, stock performance analysis, and analyst sentiment. This approach helps in providing a comprehensive view of the company's valuation.

To determine PSN's valuation, the following metrics and data points are essential:

• Price-to-Earnings (P/E) Ratio: This ratio compares the company's stock price to its earnings per share, indicating how much investors are willing to pay for each dollar of earnings.
• Price-to-Book (P/B) Ratio: This ratio compares the company's market capitalization to its book value of equity, reflecting the market's valuation of the company's net assets.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: This ratio compares the company's enterprise value (total market value plus debt, minus cash) to its earnings before interest, taxes, depreciation, and amortization, providing a valuation measure that is independent of capital structure and accounting practices.
• Stock Price Trends: Analyzing the stock price movement over the last 12 months, or longer, helps to identify trends and potential drivers of valuation changes.
• Dividend Yield and Payout Ratios: If applicable, these metrics indicate the return on investment through dividends and the sustainability of dividend payments.
• Analyst Consensus: Gathering opinions from various analysts (buy, hold, or sell ratings) provides a consolidated view on the stock's valuation and potential future performance.

As of the fiscal year 2024, here's a hypothetical snapshot of Parsons Corporation's (PSN) valuation metrics (Note: This is an illustrative example, and actual data should be sourced from financial data providers):

These metrics offer a baseline for evaluating Parsons Corporation (PSN). A high P/E ratio might suggest overvaluation if it's significantly higher than the industry average, while a lower P/B ratio could indicate undervaluation if the market is undervaluing the company's assets. The EV/EBITDA ratio provides a more comprehensive valuation view, especially when compared to peers.

Stock price trends reflect market sentiment and company performance. A positive trend typically indicates growing investor confidence. Analyst consensus serves as a جمع opinion, but investors should conduct their own due diligence.

Understanding these valuation indicators, along with a review of Parsons Corporation's (PSN) Mission Statement, Vision, & Core Values of Parsons Corporation (PSN)., provides investors with a robust framework for assessing the company's financial health and investment potential.

Parsons Corporation (PSN) Risk Factors

Parsons Corporation faces a variety of internal and external risks that could significantly impact its financial health. These risks span industry competition, regulatory changes, market conditions, and specific operational and strategic challenges.

Industry Competition: The engineering and construction industry is intensely competitive. Parsons faces competition from both large, global firms and smaller, specialized companies. Increased competition could lead to lower margins and reduced market share. To stay competitive, Parsons must continuously innovate and adapt to changing market demands. Intense competition may lead to aggressive bidding, which could reduce profitability.

Regulatory Changes: Changes in government regulations can significantly affect Parsons' operations. These changes may include environmental regulations, labor laws, and procurement policies. Compliance with new regulations can increase costs and delay project timelines. For example, stricter environmental regulations may require Parsons to invest in new technologies or processes, increasing operating expenses.

Market Conditions: Economic downturns, geopolitical instability, and fluctuations in commodity prices can all impact Parsons' financial performance. A decrease in government spending on infrastructure projects, for instance, could reduce demand for Parsons' services. Additionally, global events such as trade wars or pandemics can disrupt supply chains and project execution.

Operational Risks: Operational risks include project delays, cost overruns, and quality control issues. These risks can result in financial losses and damage Parsons' reputation. Effective project management and quality assurance processes are crucial for mitigating these risks. Parsons must also manage risks related to cybersecurity and data protection to prevent data breaches and maintain client trust.

Financial Risks: Financial risks include fluctuations in interest rates, currency exchange rates, and credit markets. Changes in interest rates can affect the cost of borrowing and the profitability of projects. Currency fluctuations can impact revenue and expenses in international markets. Prudent financial management and hedging strategies are essential for managing these risks.

Strategic Risks: Strategic risks involve decisions related to mergers and acquisitions, investments in new technologies, and market expansion. These decisions can have long-term implications for Parsons' financial health. Thorough due diligence and strategic planning are necessary to mitigate these risks. For example, a poorly executed acquisition could result in integration challenges and financial losses.

Mitigation Strategies: Parsons employs several strategies to mitigate these risks. These include:

• Diversifying its service offerings and geographic presence to reduce reliance on any single market or client.
• Investing in advanced technologies and processes to improve project efficiency and quality.
• Implementing robust risk management frameworks to identify, assess, and mitigate potential risks.
• Maintaining strong relationships with clients and partners to ensure project success.
• Ensuring compliance with all applicable laws and regulations.

Parsons' financial filings, including annual reports and 10-K filings, provide further details on these and other risk factors. These documents also outline the company's strategies for managing these risks and protecting shareholder value.

Understanding these risks is crucial for investors seeking to make informed decisions about Parsons Corporation. By carefully assessing these factors, investors can gain a more comprehensive view of the company's financial health and future prospects. For more insights into Parsons' core values and strategic direction, visit: Mission Statement, Vision, & Core Values of Parsons Corporation (PSN).

Parsons Corporation (PSN) Growth Opportunities

Parsons Corporation (PSN) has demonstrated significant growth potential across multiple strategic sectors in 2024. The company's strategic focus on technology-driven solutions, while also addressing challenges and opportunities in its federal solutions and critical infrastructure segments, positions it for continued expansion. Parsons remains optimistic about its growth prospects, driven by geopolitical shifts and increased spending in key areas.

Key growth drivers for Parsons include:

• Defense and Intelligence Market: Projected contract opportunities of $3.8 billion.
• Critical Infrastructure Modernization: Projects estimated at $2.5 billion.
• Cybersecurity and Digital Transformation: Expanding services market.

Parsons is strategically positioned to benefit from increased spending in cybersecurity, space, and missile defense. Opportunities in border security and potential involvement in Ukraine and Israel/Gaza rebuild efforts are anticipated. The company aims to continue M&A activities, focusing on cyber and space technologies, and expansion in the Indo-Pacific region is a priority for future growth.

Parsons' pipeline has consistently exceeded $50 billion for six consecutive quarters. Parsons is involved in major projects in Saudi Arabia, including NEOM and Qiddiya.

For the fourth quarter of 2024, Parsons reported a record revenue of $1.7 billion, marking a 16% increase year-over-year. The company achieved an organic revenue growth of 14%, continuing its streak of double-digit organic growth for the eighth consecutive quarter. Net income for the quarter rose by 21% to $54 million, while adjusted EBITDA increased by 14% to $147 million. Cash flow from operations was reported at $127 million. For the fiscal year 2024, Parsons reported a record revenue of $6.8 billion, representing a 24% year-over-year growth with an organic growth of 22%. Net income surged by 46% to $235 million, and adjusted EBITDA increased by 30% to $605 million. The company also reported a record cash flow from operations, which increased by 28% to $524 million. For the fiscal year, Federal Solutions revenue increased by 33%, while Critical Infrastructure revenue grew by 13%.

Future revenue growth projections and earnings estimates:

Parsons has provided its fiscal year 2025 guidance, projecting revenue between $7.0 billion and $7.5 billion, adjusted EBITDA between $640 million and $710 million, and cash flow from operating activities between $420 million and $480 million. The company also reiterated its long-term growth targets, aiming for mid-single-digit or better organic revenue growth and continual margin improvement.

Strategic initiatives and partnerships that may drive future growth:

• Microsoft Strategic Partnership: Aims to enhance digital transformation and cybersecurity capabilities.
• Vizsafe Partnership: Enhances public safety and security solutions.
• Acquisition of BlackSignal Technologies: Expands customer base across the Department of Defense and Intelligence Community. The acquisition is expected to close in August for $200 million.
• Acquisition of BCC Engineering: Strengthens Parsons’ position in infrastructure and expands reach in the Southeastern United States. The acquisition is worth $230 million.
• Acquisition of TRS Group: Enhances environmental remediation capabilities. Parsons acquired TRS in February 2025 for a price of $36 million.

Parsons is actively seeking partnerships with other industry players, government agencies, and research institutions to enhance its capabilities and access new markets. By collaborating with strategic partners, the company can leverage complementary strengths and resources to deliver comprehensive solutions to clients.

Key contract wins include two new contracts in Saudi Arabia totaling over $275 million, a $242 million option year contract with a confidential customer, and a lead design contract for the Newark AirTrain Replacement Program. The company also secured a $122 million option period contract with the Department of State and a $104 million option year on its General Services Administration C5ISR contract.

Parsons' competitive advantages that position the company for growth:

• Expertise and Experience: With a history dating back to 1944.
• Integrated Approach: Offering a comprehensive range of services, including engineering, construction, technical, and management solutions.
• Technology-Driven Solutions: Focus on technology-driven solutions in the defense, intelligence, and critical infrastructure markets.
• Strong Government and Commercial Contract Portfolio: Includes a government contract backlog of $22.1 billion.
• Integrated Delivery Advantage: Combining design expertise with construction knowledge, resulting in faster and cheaper project completion with less risk.

Parsons' integrated delivery team of construction industry experts provide added value to existing clients and new project pursuits in areas such as cost estimating, scheduling, claims support, construction engineering, construction technology, and Building Information Modeling (BIM).

For additional insights into Parsons Corporation's values, see: Mission Statement, Vision, & Core Values of Parsons Corporation (PSN).